Borders closes in Pico Rivera - and city might be stuck with rent

Here's one more example of why local government should steer clear of making any business deals. The city of Pico Rivera spent $1.6 million in federal grant money to bring Borders into the Pico Rivera Towne Center, going so far as to help subsidize the monthly rent for nearly eight years. Now, the Borders location is about to close, one of 200 stores being shuttered in the wake of the company's Chapter 11 filing. And the city is apparently on the hook to the owner of the Towne Center to make good on a lease - to the tune of $33,932.91 a month for 72 months, or until a new tenant moves in. City officials say they're only liable for $10,833.33 a month (the rent subsidy to Borders). From the Whittier Daily News:

The bookstore, which opened in the Pico Rivera Towne Center in July 2003, generated about $35,000 a year in sales tax revenue, according to Assistant City Manager Jeff Prang. Officials said the decision to bring a bookstore into the community was a quality-of-life issue. As spelled out in both agreements, the city and redevelopment agency wanted Borders in the community to enhance educational and cultural opportunities. The expected benefits included sales tax revenues, job opportunities, plus music, reading material and cultural materials for the community.

Huh? Tax revenue of $35,000 a year and the city might be stuck paying $34,000 a month in rent? Who cut that deal? But hey, who cares - the money is coming from an $8-million federal grant. "We were able to put something aside to attract a first-class bookstore to Pico Rivera. We were the only predominantly Latino community with a national chain bookstore," said Councilman Gregory Salcido. A fat lot of good that does now.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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